The other day I had the good fortune to sit next to a very interesting man on a flight to Chicago. It turned out that he was an independent consultant and premium priced contractor for various factories around the world. His job was to fix specialized machines, not himself, but to supervise the existing workers while they fixed the machines. He had several competitors in this very niche field, and he commanded the highest prices.
One area I asked him about was his hiring practices. He stated off the bat that he does not hire young men. Young men tend not to be able to handle pressure. Some of these factories lose $20,000 per minute while their machines are broken. He cannot chance hiring someone who cannot deal with the pressure of that factory owner; his people need to be able to stay calm under pressure, reassure the owners, and be able to throw off any meddling.
I asked him if these skills were inherent or could be learned, and he was fairly emphatic that these character traits were innate. He stated that he could teach technical skills, but force of character was something that no one could teach.
If he hired any subpar worker, he jeopardized his own business reputation, which would be a fatal business mistake in a world where he was the premium name in the business. To command premium wages, he also held his workers to strict standards: Clean clothes every day, freshly shaved (even in remote locations), and even hard expectations for working hours (14+ hour days). At $200 per hour, he would not allow subpar performance (he stated he had to price under $200 because there was a mental breaking point for his customer).
Men in his industry did not stay married for long. This is one reason he preferred to hire unmarried men and men without young families. Hand in hand with premium prices were long work hours and 2 weeks at a time per month away from the family. The contractor stated he had an acute hiring problem. It was almost impossible to find competent and able workers.
This contractor also detailed his dealings with foreign nationals. He adopted the practice of cash-up-front with those businesses in India due to their consistent defaulting and attempts to underpay after the job is complete. He stated it was general practice to hire out contractors, and then offer them 25% less when the job was completed. One way businesses could hedge against this was to overprice by about 25% and then take the deduction. He instead offers a take-it-or-leave it (no negotiation) route. He also had to verify prior to taking their job his mode of transportation and housing, such that in that area he was not abused.
Some practical take aways:
1. Professionalism and image are critical to businesses. If a business is in the practice of being unprofessional or of delivering inferior product, they will lose market power. The only reason this contractor commanded a premium was due to his reputation. Reputation matters.
2. Not all workers are qualified for all jobs. Even well paying jobs have a hard time attracting qualified workers.
3. Discriminating during hiring is useful and commonsense. Laws against discriminating based on age, marital status, and age can not only hurt the workers, but can cripple a business.
4. Bad business practices have consequences. In the case of the Indian companies, short sited short changing leads to higher costs and less mutual trust. It does not pay to rip people off. You may get away with it once or twice, but there are real-world consequences.
5. Premium prices can be commanded based on a premium image that includes factors that are irrelevant to job performance. Business transactions involve much more than an exchange of goods or services for money.
In all it was a fruitful conversation. I ended the conversation by talking about the modern miracle of flight (to which this titan of industry had become immune with his persistent traveling). I remarked that we live in an amazing world in which he can fly from the Caribbean to the remote north and back again within a couple days. He agreed, and we left on a mutual admiration of our circumstances.